19992 Federal Register / Vol. 72, No. 76 / Friday, April 20, 2007 / Notices 

1 15 U.S.C 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(6). 

5CBOE might in the future submit to the 

Commission a proposed rule change to include 

arrangements with third party vendors that are not 

CBOE members. 

6For example, if a CBOE member were to enter 

an order to buy 250 contracts using the sweep 

function at a time when CBOE is at the NBBO for 

100 contracts, the sweep function would need to be 

configured to send an order for 100 contracts to 

CBOE, with the balance of the order routed as 

specified by the member entering the order from the 

configurations offered by the routing functionality. 

Nothing would require that a person using the 

routing functionality actually use the sweep 

function, and, in this same example, if the CBOE 

member wished to route the entire order for 250 

contracts to an exchange other than CBOE using the 

routing functionality, it would be free to manually 

override CBOE as the default destination for the 

entire order. 

7This requirement would not prevent the 

participating member from charging fees (for 

example, a flat monthly fee) for the general use of 

its order routing system. Nor would it prevent the 

participating member from charging fees or 

commissions in accordance with its general 

practices with respect to transactions effected 

through its system. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55629; File No. SR–CBOE–

2007–34] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Regarding Subsidy 

Arrangements with Members That 

Provide or Use Certain Order Routing 

Functionalities 

April 13, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 5, 

2007, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

substantially prepared by CBOE. CBOE 

designated this proposal as one 

establishing or changing a due, fee, or 

other charge applicable only to its 

members pursuant to Section 

19(b)(3)(A)(ii) of the Act 3 and Rule 19b–

4(f)(2) thereunder,4 which renders the 

proposal effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested parties. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

CBOE proposes to enter into subsidy 

arrangements with CBOE members that 

provide certain order routing 

functionalities to other CBOE members 

and/or use such functionalities 

themselves. This rule change does not 

provide for any modifications to the text 

of CBOE’s rules. The proposed rule 

change is available on the Exchange’s 

Web site (http://www.cboe.com), at the 

Exchange’s Office of the Secretary, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

CBOE included statements concerning 

the purpose of, and basis for, the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. CBOE has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, Proposed Rule 

Change 

1. Purpose 

CBOE proposes to enter into subsidy 

arrangements with CBOE members that 

provide certain order routing 

functionalities to other CBOE members 

and/or use such functionalities 

themselves.5 To qualify for the subsidy 

arrangement, a member’s order routing 

functionality would have to: enable the 

electronic routing of orders to all of the 

U.S. options exchanges, including 

CBOE; provide current consolidated 

market data from the U.S. options 

exchanges; and be capable of interfacing 

with CBOE’s API to access current 

CBOE trade engine functionality. The 

routing system would also need to cause 

CBOE to be the default destination 

exchange for individually executed 

marketable orders if CBOE is at the 

national best bid or offer (‘‘NBBO’’), 

regardless of size or time, but allow any 

user to manually override CBOE as the 

default destination on an order-by-order 

basis. The order routing functionality 

would be required to incorporate a 

function allowing orders at a specified 

price to be sent to multiple exchanges 

with a single click (a ‘‘sweep function’’) 

and the sweep function would need to 

be configured to cause an order to be 

sent to CBOE for up to the full size 

quoted by CBOE if CBOE is at the 

NBBO.6 Any CBOE member would be 

permitted to avail itself of this 

arrangement, provided that its order 

routing functionality incorporates the 

features described above and satisfies 

CBOE that it appears to be robust and 

reliable. The member would be solely 

responsible for implementing and 

operating its system. 

CBOE is proposing to make payments 

to participating CBOE members to 

subsidize their costs of providing the 

routing services. The payment would be 

$0.05 per contract for orders routed to 

CBOE through a participating member’s 

system. The participating member 

would have to agree that it would not 

be entitled to receive any other revenue 

for the use of its system specifically 

with respect to orders routed to CBOE.7

A participating CBOE member could 

also elect to have CBOE perform certain 

additional marketing services on its 

behalf. These services would consist of 

including the member’s functionality in 

the general marketing activities of 

CBOE’s marketing staff. CBOE would 

permit a member electing to have CBOE 

perform these services place CBOE’s 

‘‘HyTS’’ trademark on its order routing 

functionality in a manner satisfactory to 

CBOE. If a member elects to have CBOE 

perform these services, the amount that 

CBOE pays the member for orders 

routed to CBOE through the 

participating member’s system would be 

reduced from $0.05 per contract to $0.04 

per contract. The minimum term of 

these services would be one year, after 

which a member could terminate the 

marketing services effective at the end 

of a calendar month. 

A participating CBOE member could 

also elect to have CBOE perform the 

service of billing other CBOE members 

with respect to the use of the 

participating CBOE member’s router. A 

participating member that elects to have 

CBOE perform this service would pay 

CBOE a service fee of one percent of the 

fees collected by CBOE for that member. 

A member could terminate this service 

at the end of any calendar month. 

Nothing about the subsidy 

arrangement would relieve any CBOE 

member that is using an order routing 

functionality provided by another 

member or its own functionality from 

complying with its best execution 

obligations. Specifically, just as with 

any customer order and any other 

routing functionality, a member would 

have an obligation to consider the 

availability of price improvement at 

various markets and whether routing a 

customer order through a functionality 

that incorporates the features described 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 72, No. 76 / Friday, April 20, 2007 / Notices 19993 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(4). 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(2). 12 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 1 replaces and supersedes the 

original filing in its entirety. 

above would allow for access to such 

opportunities if readily available. 

Moreover, a member would need to 

conduct best execution evaluations on a 

regular basis, at a minimum quarterly, 

that include its use of any router 

incorporating the features described 

above. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the Act 8

in general and furthers the objectives of 

Section 6(b)(4) of the Act 9 in particular 

in that it is designed to provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among CBOE 

members and other persons using its 

facilities. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange neither solicited nor 

received comments on the proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing rule change 

establishes or changes a due, fee, or 

other charge imposed by the Exchange, 

it has become effective pursuant to 

Section 19(b)(3)(A) of the Act 10 and 

Rule 19b–4(f)(2) 11 thereunder. At any 

time within 60 days of the filing of the 

proposed rule change, the Commission 

may summarily abrogate such rule 

change if it appears to the Commission 

that such action is necessary or 

appropriate in the public interest, for 

the protection of investors, or otherwise 

in furtherance of the purposes of the 

Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to 

rule-comments@sec.gov. Please include 

File Number SR–CBOE–2007–34 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2007–34. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of CBOE. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–CBOE–2007–34 and should 

be submitted on or before May 11, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7493 Filed 4–19–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55630; File No. SR–CBOE–

2007–21] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Order Granting Accelerated Approval 

of a Proposed Rule Change, as 

Modified by Amendment No. 1, To List 

for Trading Options on Commodity 

Pool Units 

April 13, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on February 

22, 2007, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been 

substantially prepared by the Exchange. 

On March 26, 2007, CBOE filed 

Amendment No. 1 to the proposed rule 

change.3 This order provides notice of 

the proposed rule change as modified by 

Amendment No. 1 and approves the 

proposed rule change on an accelerated 

basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

CBOE Rules 4.18 Interpretation and 

Policy .01, 5.3 Interpretation and Policy 

.06, 5.4 Interpretation and Policy .08, 

8.9, and 15.1 Interpretation and Policy 

.04 to permit the listing and trading of 

options on securities issued by Trust 

Issued Receipts (‘‘TIRs’’), partnership 

units (‘‘Partnership Units’’), and other 

entities whose value is based on 

underlying commodity interests 

(referred to collectively herein as 

‘‘Commodity Pool Units’’). 

The text of the proposed rule change 

is available at the CBOE, the 

Commission’s Public Reference Room, 

and http://www.cboe.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

CBOE included statements concerning 

the purpose of and basis for the 

proposed rule change. The text of these 


sroberts on PROD1PC70 with NOTICES